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Can Cineplex rise again?

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With pandemic restrictions evaporating left and right as governments look to open the economy’s doors once again, movie theatres are priming their popcorn makers for the return of patrons eager for a taste of normalcy along with their butter flavouring. But how much of a return it will be is still a big unknown, since many of us have gotten well used to gorging on TV series and films from the comfort of our couch, minus the $10 popcorn and minus any worries about all those other people’s germs floating around a packed movie theatre.

Therein lies the real doubt about a company like Cineplex (Cineplex Stock Quote, Charts, News, Analysts, Financials TSX:CGX) which has yet to entrance investors as the stock remains roughly around the same level it was at the start of the pandemic. But CGX was already in trouble in the years preceding COVID, losing about half of its value between mid-2017 and the end of 2019 with the drop being blamed on streaming services like Netflix which were keeping customers away from theatres at an increasing rate. Cinema companies like Cineplex were having to work harder to squeeze more dollars out of each patron as the number of ticket-buyers continued to dwindle.

But Cineplex made a big push by bringing in higher-priced options in VIP lounges and ultra AVX seating along with alcohol and dining for adults and more games in their Rec Room activity centres. Those efforts were paying off, too. Theatre attendance had dropped in 2019 compared to 2018, going from 69.3 million to 66.4 million, but the company managed to eke out some positive revenue growth nonetheless, hitting $1.665 billion for 2019 compared to $1.612 billion for 2018. 

And Cineplex looks like it will keep up that strategy this year as theatres reopen. Speaking after the company’s recent release of fourth quarter 2021 results, CEO Ellis Jacob said CGX aims to spend between $70 and $75 million in opening up more VIP-level theatres and doubling down on those extra experiences for patrons across Canada.

“We opened three new VIPs a couple of Rec Rooms and Palladiums. Our business continued to move forward and we want to give our guests the best experience they can have when they enter our facilities,” said Jacob, speaking on BNN Bloomberg on Monday.

Jacob said he’s optimistic that Cineplex will return to pre-pandemic levels in its business and that 2022 has a number of blockbusters that will bring in patrons.

“I feel that the feature films will start also doing better as we move forward. You’re going to have things like Licorice Pizza, West Side Story and Dune — these are all movies that got nominated [for awards] and I feel that they will continue to do well and that audience will return to our theatres as they get more comfortable,” he said.

Yet another hurdle for Cineplex is its ongoing legal battle with global cinema company Cineworld whose deal to buy Cineplex, first announced in December 2019, was axed when Cineworld left the table in June, 2020. Both companies then filed suits and this past December Cineplex was awarded almost $1.24 billion in damages when an Ontario Superior Court ruled in its favour. That decision has been appealed by Cineworld and last month Cineplex itself filed a cross appeal saying that the $1.24 billion would be too little, asking for a full $2.8 billion damages.

Cineplex reported its fourth quarter and 2021 financials last week, showing a net loss of $21.8 million or $0.34 per share for the quarter, which was better than the loss of $230.4 million or $3.64 per share a year earlier in the depths of the pandemic. Cineplex reported 10.2 million customers over the 2021 Q4, the best quarterly result for the year. Fourth quarter revenue was $300.0 million compared to $25.5 million a year earlier. Analysts had been calling for $319.2 million in revenue and a loss of $0.13 per share.

“Cineplex delivered its strongest quarter in two years,” said Jacob in a press release. ”Based on the positive momentum we saw during the quarter, and the success of blockbuster films like Spider-Man: No Way Home, we know that guests are coming back to our theatres. Government mandated restrictions and closures in Ontario, Quebec and Atlantic Canada during the busiest box office period constrained our ability to fully capitalize on this resurgence in the fourth quarter as compared to other geographies, including the U.S.”

Cineplex’s share price finished 2021 up 47 per cent while so far in 2022 the stock is at even.

About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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